Correlation Between Chesapeake Energy and Opawica Explorations
Can any of the company-specific risk be diversified away by investing in both Chesapeake Energy and Opawica Explorations at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Chesapeake Energy and Opawica Explorations into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chesapeake Energy and Opawica Explorations, you can compare the effects of market volatilities on Chesapeake Energy and Opawica Explorations and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Chesapeake Energy with a short position of Opawica Explorations. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chesapeake Energy and Opawica Explorations.
Diversification Opportunities for Chesapeake Energy and Opawica Explorations
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chesapeake and Opawica is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Chesapeake Energy and Opawica Explorations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opawica Explorations and Chesapeake Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Chesapeake Energy are associated (or correlated) with Opawica Explorations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opawica Explorations has no effect on the direction of Chesapeake Energy i.e., Chesapeake Energy and Opawica Explorations go up and down completely randomly.
Pair Corralation between Chesapeake Energy and Opawica Explorations
Assuming the 90 days horizon Chesapeake Energy is expected to generate 1.3 times less return on investment than Opawica Explorations. But when comparing it to its historical volatility, Chesapeake Energy is 5.49 times less risky than Opawica Explorations. It trades about 0.15 of its potential returns per unit of risk. Opawica Explorations is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4.35 in Opawica Explorations on February 26, 2024 and sell it today you would lose (0.05) from holding Opawica Explorations or give up 1.15% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 90.48% |
Values | Daily Returns |
Chesapeake Energy vs. Opawica Explorations
Performance |
Timeline |
Chesapeake Energy |
Opawica Explorations |
Chesapeake Energy and Opawica Explorations Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chesapeake Energy and Opawica Explorations
The main advantage of trading using opposite Chesapeake Energy and Opawica Explorations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chesapeake Energy position performs unexpectedly, Opawica Explorations can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Opawica Explorations will offset losses from the drop in Opawica Explorations' long position.Chesapeake Energy vs. Wicket Gaming AB | Chesapeake Energy vs. Procter Gamble | Chesapeake Energy vs. Boyd Gaming | Chesapeake Energy vs. Estee Lauder Companies |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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